Hindustan Unilever Limited (HINDUNILVR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hindustan Unilever Limited Conference Call for September Quarter 2020. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Sood, Group Controller and Head of Investor Relations. Thank you, and over to you, sir.

Thanks, Aman. Good afternoon, and welcome to the conference call of Hindustan Unilever Limited. We will be covering this afternoon the results for quarter ended September 30, 2020. On the call from HUL end is Mr. Sanjiv Mehta, Chairman and Managing Director; and Mr. Srinivas Phatak, Chief Financial Officer, HUL. We hope that you are staying safe and healthy. Given the exceptional circumstances created by COVID-19 outbreak, we are presenting the results to you from our respective homes. So please bear with us if there is any technical glitch. As is customary, we will start the presentation with Sanjiv sharing his perspective on market and an overview of how we are navigating the current environment. Then Srinivas will share with you our performance for the quarter with category highlights and our outlook for future. Before we get started with the presentation, I would like to draw your attention to the safe harbor statement included in the presentation for good order sake. With that, over to you, Sanjiv.

Thank you, Amit, and good afternoon, everyone. Thanks a ton for being in the call, and I do hope you and everyone that you love and cherish are safe and healthy. I think before I get into the results and give you my perspective, which would -- I would be remiss if I don't express my thanks and gratitude to every member of HUL and extended value chain, especially our front line heros in factories and sales for the outstanding commitment and hard work they have shown in these most difficult circumstances. We are also, in equal measure, humbled and honored to serve the everyday needs of Indian consumers. We also express our gratitude to all the front line heroes in our country who are very -- in a very commendable manner managing this pandemic. And on behalf of everyone at HUL, we also extend our deepest sympathies to all those who are struggling to cope with the crisis and who have most unfortunately lost a loved one. Our strategy is serving us well. For the last 6 months, cooped up at home, it has felt as if the world has come to a standstill. However, when we look beyond the headlines of COVID, the pace of change has been immense, be it in respect to consumer behaviors, digitization, creation of new business models as well as disruption of longstanding ones. In these most demanding times, our performance in the September quarter has shown the true strength of HUL. We have demonstrated resilience in our portfolio of -- interventions in a consistent step-up of operational excellence and in our financial strength. We have unlocked new levels of agility in responding to the unprecedented fluctuations in demand, coupled with complex challenges in the supply chain. All of this has been possible because of the strength and grounding that we draw from a consistent strategic agenda, a multi-stakeholder model, our 5 growth -- and our 5 growth fundamentals. We continued to progress the purpose-led and future-fit agenda and reimagining HUL's digital transformation program, which has become even more critical after the pandemic. Our agenda to deliver consistent, competitive, profitable and responsible growth remains unchanged. Our 5 growth fundamentals are crucial completing a strong and long-term business with excellent execution. At the same time, they remain extremely relevant for the short-term and have proven helpful in keeping the business focused. For example, there is no better time to focus on things such as product superiority, physical availability of our brands to demonstrate the positive contributions to society. And I will take you through some of these in detail in the course of this call. The next chart, please. This quarter has seen operating environment improving progressively. Initially, the vertical lockdowns in different parts of the country caused -- posed multiple challenges to our supply chain. With sequential easing of lockdowns, increasing mobility and measures taken by the government and Reserve Bank, we have seen a step-up in economic activity. Major macroeconomic indicators are showing improvement from the unprecedented trough the economy had hit in April, May. Normal monsoon, increased MSPs, increased MGNREGA outlays and demand shift from urban to rural because of shifting of people is auguring well for rural, and we are seeing rural markets as well as smaller towns perform relatively better. On the other hand, demand in metropolitan cities continues to be muted. Hence, while the worst may be behind us, we believe that as a consumption-driven economy, it is vital to get the consumption going so that the economy gets into a virtuous spiral. Next, coming to the commodities and currency. We are witnessing unprecedented inflation in tea. While crude has been benign, palm oil continues to remain at elevated levels. We believe the inflation in select categories is likely to continue in the near term. Next chart. The health, safety and well-being of our people is and will remain our utmost priority, and not just people who are on our rolls but the entire ecosystem that works with us. We have implemented tiered operating protocol based on global best practices, WHO guidelines and government requirements. We have set in place a comprehensive medical resilience plan with full-time doctors appointed in remote factories and 100% of our sites having active partnerships with hospitals for medical care and observation. We are doing proactive medical testing in high incidence factories as per our tiered protocol and partnering with local authorities and communities to contain the impact of the pandemic. All our 20,000-plus employees are covered by the company medical plan, which includes support for COVID-19. We have further expanded COVID-19 insurance coverage to over 24,000 people in our outer core. Even before COVID-19 hit the world, ensuring holistic employee well-being was very important for us at HUL. We were one of the first corporates to design a one-of-its-kind initiative, which is the Well-being Quotient, which enables employees to self assess their state of well-being and get customized well-being support suited to one's own needs. The pandemic has redefined the importance of well-being. Hence, during this period, we have activated 6,000-plus hours of well-being initiative for employees. We customized the frequency and intensity of solutions using a segmented approach, creating a bouquet of solutions to meet the exact needs of employees, such as expert-led sessions, role modeling by leaders, webinars conducted targeting specific challenges, such as sleep, ergonomics, stress management, et cetera. Recently, we commenced the World Mental Health Week on October 5, with a day of thanks to all our employees. The day was marked holiday for all employees as a token of gratitude. We planned the entire week on the theme, care for myself, my team and us all, and ran sessions with trained experts and partners, touching over thousands of employees and their families and have crafted personalized well-being programs for employees. We also rolled out Mental Health Champion program, where we have built capability of our employees to be mental health champions and encouraging peers to reach out in case of them facing difficulty on mental well-being. As a result of all this, we are seeing record levels of 90% employee engagement at a UniVoice anonymous poll that took place a few weeks back. Let me highlight a couple of extraordinary achievements here. The first one is that we have received the highest scores from our frontline heroes on taking pride in HUL. In the current environment, our frontline heroes have done tremendous hard work, and this high engagement level is a testimony to our investment in people. Other key highlight is that 94% of nutrition employees that came on board are taking pride in working for HUL. It's a testament to the flawless integration that took place. 91% of our employees are energized with purpose, inspiration and a growth mindset. This year has been like no other, and keeping up energy engagement and morale has been very critical. Holistic well-being continues to be of high focus as we move ahead, and it will be intertwined with the leadership and people strategy. Our philosophy is very simple, ladies and gentlemen. We look after our people so that they look after our business. Organization agility quotient has never been this fast. 100% of our factories and depots are now operational during the last 6 months. Despite being hit by COVID-induced challenges, we have successfully signed 8 wage settlements, including the nutrition factory. Disrupted supply lines in nutrition business are now fully restored. Our supplier service levels are back to pre-COVID normal. This is despite the challenges we faced due to strict and unplanned localized vertical lockdowns in many geographies. An important part of this responsiveness has also been building flexibility and supply security across the supply chain. This was achieved by actions such as identifying 120-plus alternate suppliers and approximately 90 approved and tested flex formulations. Again, I would like to thank my supply chain colleagues for their amazing work. Our supply chain today is well positioned both on just-in-time and just-in-case requirements. The environment demanded that we move at tremendous speed, and we have taken decisive actions to sharpen the execution. Let me give you a few examples. We stepped up our direct coverage by 10% sequentially and are now back to a pre-COVID level. We increased our assortment offering substantially from June quarter. Assortment levels at exit of September were 70% higher than June exit. While pandemic saw e-commerce reach inflection point, yet in many ways, it has also marked the renaissance of the humble nextdoor grocer. The general trade is now much more open to the adoption of technology, and therefore, digitizing and modernizing this channel is a big opportunity. At HUL, we have always worked with and for the kirana stores. Our traditional trade ecosystem is defined on 3 pillars: demand capture; demand fulfillment; and demand generation. Technology is the backbone of this pillar. Shikhar, our B2B ordering app is now available in 2.7 lakh stores. We have also joined hands with SBI to enable credit extension in a seamless manner to the retailers, within our ecosystem at attractive interest rates through the Shikhar app. Coming to e-commerce channels. With the cocooning effect and preference for everything e, there are clear tailwinds for e-commerce business. Online shopping, especially online grocery will not revert to pre-COVID level once social restrictions are no longer in place. We initially focused on availability in the lockdown's early stages. We then partnered with retailers with category expertise and achieved a higher share of assortment. As a result, when country started to unlock, within a month, our online availability was back at 80% of normative levels. This set us up for accelerating momentum. We've predicted shopper trends and category shifts and accordingly designed portfolio and communication, specifically for the channel, which enabled us to perform competitively. As a result, we have gained share from pre-COVID levels. E-commerce channel contribution for us has doubled on year-on-year basis. Sequentially, the growth momentum has picked up significantly, and our growth in this channel are now 2x versus the June quarter of '20. It has never been more relevant for brands to demonstrate their positive contribution to society. So we are investing on communication which are explicitly purposeful and consumer relevant. Lifebuoy and Domex are communicating the hygiene message, and in doing so, they're also spreading awareness and providing relevant information for staying safe. Hamam, known for championing safety for women, whether its GoSafeOutside campaign, spread the message of hand washing, hygiene to stay protected at home. Red Label extended its long-running Taste of Togetherness campaign through a simple but contemporary message that we can be socially connected even while we are physically distanced. We have also repurposed communication across the hair care portfolio. For instance, Clinic Plus is creating relevance of hair wash with clean and strong proposition. Dove on the other hand is talking about damage repair. You may have to twist, tug and pull hair to do what's needed, but we're tough. You don't have to worry about damage. That's the message. COVID, amongst many other things, has interrupted childhood as children are forced to be at home. Surf Excel's new communication, Bachpan Zara Ruk Ja, nudges all the parents to restore childhood by becoming the children's friends and encourages active play between parents and the kids. We know that perpetual brands stand out, drive consumer choices and perform better in long run. This, we believe, is true earlier as well as during and after the crisis. Consumer behavior has changed radically in response to COVID-19 lockdown. We see the megatrends of clean living, preventive immunity, normal consumption are sticking with consumers. During the crisis, we have been focusing on the innovation that are consumer and contextually relevant. We have accelerated our innovation pipeline and launched more than 100-plus SKUs in the last 6 months. Our teams have reacted very quickly to capture the new growth opportunity that this crisis has presented. We brought into market a range of hygiene products and Lifebuoy, right from an army of sanitizers to germ kill spray and wipes to laundry sanitizer. Within the newly acquired VWash portfolio, we launched an access pack in this quarter to build affordability and value in intimate hygiene category. In Home Care division as well, we did a number of launches to take away consumer home hygiene related world. Domex's disinfectant spray, Domex wipes, Surf Excel Anti-Germ Wash Booster and Vim Antigerm Bar. In addition to good hygiene practices, we also need to have a healthy diet that builds the body's natural defense mechanism. And we are delighted to support our consumers in this journey with our immunity boosting Horlicks with added zinc, which was launched in April just after we took over this business. The COVID-19 crisis has aggravated challenges faced by the vulnerable and underprivileged communities. To come out stronger, governments, business and society must come together. As a responsible business, we had committed INR 100 crores. In the last 6 months, we have deployed nearly 70% of our commitment as a purpose-driven [ company ]. We have donated 14 million soaps to the vulnerable sections and essential workers. We are supporting the hospitals with medical testing kits and equipments like ventilators, distributing soaps and sanitizer to health workers, police, sanitation workers, et cetera. We have upgraded medical facility for COVID patients as well as provide them with protective gears and also our products to the public health authority. We are supporting the nutritional needs of our frontline health workers. We are utilizing a pan-India reach to distribute food to needy people, both in urban and rural India. Finally, we are a marketing company and have expertise in changing consumer behavior. So we have partnered with UNICEF to create campaigns encouraging people to adopt the right behavior. We partnered with BMC to create a public awareness campaign, Corona Se Mat Daro (sic) [ Corona Se Mat Darona ] and our campaign BreakTheChain, VirusKiKadiTodo has reached over 600 million people delivering simple but powerful messages on social distancing, hand washing and generosity. The next slide, please. We have delivered a competitive and profitable growth. Reported turnover growth stands at 16% and domestic consumer growth, excluding the impact of merger of GSK and acquisition of VWash, is 3% for the quarter. From competitive lens, we sustained our strong fundamentals. As for Kantar, 70% of our business is gaining penetration on a relative basis in MAT August '20. In the absence of other stable data, we use Kantar panel to look at volume shares as a surrogate measure, and more than 90% of our business is willing volume share -- is winning volume share. If you look at our performance sequentially, our business has picked up momentum. From the declines we saw in March and June quarter, we have accelerated to a positive growth trajectory. The 3% growth at an overall level marks the big positive we are seeing in the health, hygiene and nutrition portfolio. This portion of the business constituting about 80% has grown at 10%. The growth of this portfolio has almost doubled sequentially. This performance reflects our focus on portfolio intervention, channel-specific strategies, agility in operations and execution prowess. Looking forward, while we are cautiously optimistic about the midterm outlook, we are confident of the medium to long-term growth prospects of the FMCG sector. We will focus on competitive volume-led growth, absolute profit and cash delivery. We remain committed to further strengthening our portfolio of brands through bigger and better innovations and unblinking defense of a strong market leadership position. The fundamental drivers of growth continue to be the key principles driving our execution, and we remain focused on delivering superior long-term financial performance through our sustainable business model. With this, let me now hand over to Srinivas, who will cover the details of our quarter's performance. Srini, over to you.

Yes. Thank you, Sanjiv. Good evening, everyone, and I hope all of you can hear me. Sanjiv gave you a very good perspective about the overall economic environment and how we have progressed. Let me do a bit of a deep dive into some of the results and clarify some of the specifics. Obviously, the operating environment has improved progressively during the quarter as lockdowns have eased and the economic activities [Technical Difficulty]. Agility and execution prowess across the value chain enabled us to unlock the growth momentum and hence really deliver a competitive and a profitable performance. Our reported turnover stood at 16%, including the Nutrition business and with -- as well as acquisition of VWash. On a like-for-like business, excluding the impact of M&A, our domestic consumer business in September quarter '20 grew by 3% with a positive UVG of 1%. Within this construct, 80% of our business, which comprises of health, hygiene and nutrition, actually did well with 10% USG. The discretionary and out-of-home categories, while have improved sequentially as the restrictions have eased, but given that the consumers continue to stay at home and consume cautiously, have got impacted. And I will talk about them when we move into the other slides in details. With respect to bottom line, our EBITDA at INR 2,869 crores registered a 30 basis points increase. But if I give you a bit of a flavor, our base business, which is excluding the acquisitions, actually had a decline of 60 basis points, whereas 90 -- we got a benefit of 90 basis points coming from the Nutrition business, which therefore, translated into a 30 basis points increase on an overall basis. Our profit after tax, but before exceptional items, grew by 11%. And our net profit at INR 2,009 crores grew by 9%. Some key exceptional items during the quarter include restructuring expenses of INR 69 crores in our supply chain, our M&A-related cost of INR 17 crores, which was net off by about INR 5 crores of surplus from sale of property. You would also recollect that the changes to the tax legislation in the form of the corporate tax cut were effective September '20, that's in the base period. So therefore, if you really look at our base, there was 1 additional quarter of benefit from our corporate tax. This in a manner explains the difference between the PAT (bei) and the profit -- net profit to that extent. When I look at, let's say, our divisions, it's fair to say that Foods & Refreshments have accelerated, whereas Home Care and BPC have stabilized. Our F&R business has grown at 19%, and I think it's important to understand some of these numbers on a sequential basis. In June quarter, BPC had a negative growth of 12% and F&R was negative 4%. From that perspective, we have now had BPC at a flat growth and Foods & Refreshments accelerating at about 19%. Let's deep dive into -- a little bit into the businesses and give you a flavor of the performance. Within Home Care, Household Care has delivered a strong double-digit growth, really led by penetration gains. Our Domex range now is going national. And as also, as Sanjiv talked about it, we have also expanded into some of the other categories and segments such as wipes and other benefits. In Fabric Wash, as you are well aware that we have seen an easing in the crude prices. And given our long-lasting principles on how we manage this business, we have actually taken down prices in parts of our portfolio to actually pass on the benefits to the consumers. This is a structural and a fundamental way we run the business, and this, we believe, will serve us well in due course. Having said that, the category consumption of laundry has been adversely impacted due to confined living. A lot of people actually remain in home and therefore, some of the top-up purchases that we used to see when people used to step out have not come through to the levels that they should have. But we are confident that this is going to get corrected as the country continues to open up, and we'll unlock the opportunities. Keeping in focus the clean living needs of the consumers, we have stepped up our innovation intensity with a number of launches like Surf Excel Anti-Germ Wash Booster, Vim Antigerm Bar, Vim scrubbers, Domex wipes, et cetera. In Beauty & Personal Care, I think the heartening news is that Skin Cleansing, Oral Care and Hair Care have all performed well with double-digit growth. Performance in Lifebuoy continues to be stellar on the back of penetration gains. With a purpose-led communication, Lifebuoy has been spreading awareness around the frequent hand washing habit and which is also a deterrent against the infection spread. It's also pleasing to see that Lux has started to deliver a good performance in the quarter, and this positions us well. Oral Care delivered double-digit growth, led by Close Up. We also had strong performance in hair as we repurposed the brands and focused innovations to help drive salience. Sanjiv spoke about some of the campaigns, which included Sunsilk basically using Your Shine is Unstoppable campaign, which is encouraging young girls to find their shine even in dullest of days. So overall, hair care grew in double digits. When we look at Skin Care, the essential parts of Skin Care is resilient and is growing well, while the winter portfolio sell-in was impacted due to some muted trade sentiments and liquidity constraints. This, we believe, is more of a pipeline adjustment issue. Of course, you would realize that in this environment, liquidity is constrained. There is limited space on the shelf from a retailer point of view. And they would actually like to see a bit of an onset of winter before they start to order. So what we believe is that this is more of a phasing issue, which is going to come in and no reason to see it as a structural issue at this stage. Both Glow & Lovely and Glow & Handsome are successfully on the shelves. Mere Glow Ko Na Roko campaign is encouraging girls to choose their identity, and this is really positioning us very well with the biggest change and transformation that we've done to our brand in our recent history. In Foods & Refreshments, I think we've really hit the sweet spot of leveraging the in-home consumption, and this is really helping us both from a Foods point of view as well as Beverages. In foods, both Kissan and Knorr have seen strong consumer traction and Foods has grown in double digits. Performance in tea was particularly stellar, with all our brands really growing in double digits. As many of you would be aware, there has been unprecedented tea inflation, ranging anywhere between 50% to 70%. We have been actually been very judicious in pricing across our portfolio. We are doing this dynamically, really leveraging our balance sheet strength. I think when we do this sensibly, I think it gives us a big opportunity to actually gain from the unorganized players and strengthen our competitive performance. And if it means that in the short term we will actually take a bit in the gross margins, we're absolutely comfortable to do that because I think this gives us a massive opportunity to structurally reshape the market and gain competitively. Coffee continues to perform well through volume-led growth. Our Nutrition business, this has been the second quarter, and we are actually quite pleased with the overall integration. But as Sanjiv has spoken about, while our growth has been competitive, that is, we have been gaining shares as per Kantar panel, we did have supply chain issues. Two of our key sites, be it Rajahmundry and Nabha were impacted because of COVID and IR issues. This basically impacted the output that we could get. While from a secondaries' point of view, consumers were not impacted, but from a primaries' point of view, our pipelines had gone down. The good news is, now these have all been sorted out, and we have all resolved them. If we -- so therefore, given the context of these disruptions, if you were to use GSK as a base, our growth would have been flat. But for the supply chain disruptions, we would have seen similar levels of growth as we saw in the previous quarter. Having said that, we have had many exciting innovations. Boost has gone national. Horlicks actually has come back with a very powerful communication that celebrates the confidence that empowers children. With supply issues behind us and with an innovation funnel which is looking quite strong, we hope to see much better growth rates, and we have quite -- actually quite confident about the growth potential coming from the next quarter, and we should see the trajectory to move up. As I said, we have seen a sequential improvement in out-of-home consumption and ice creams. But given that we still are not fully out into the open, these businesses have seen an impact, albeit the loss has been lower than where we saw previously. I think this is a chart which we used, which is contextual, we used it in the previous quarter, and we want to actually repeat it this quarter. It's giving really the flavor of the business through the lens of health, hygiene & nutrition, discretionary and out-of-home. Of course, this excludes the impact of the M&A portfolio, and therefore, this is a construct which will explain the 3% growth. 80% of our business has grown in 10 -- at 10% with a high contribution of underlying volume growth. And this is actually up from the 6% of previous quarter. When you look at 15% of our business, which comes from skin, color and cosmetics, has registered a decline of 25% versus 45%, which was in June quarter. We saw sequential improvement as some parts of the essentials of the portfolio started to come back. Colors and deodorants remain impacted, and they will take some time, and we need to see a bit more of the opening up of the economy and people coming more to work for these segments to really pick up. The out-of-home categories, contributing about 5%, were disproportionately impacted. These declined by about 25%, but this compares to a 69% in June. So it's fair to say that we've seen a sequential improvement, and that's also reflected in our base business, which has actually moved from minus 7% to a positive 3% or the reported growth, which had moved from 4% to 16%, if you were to compare sequentially. From a P&L point of view, I think the headline statement summarizes it well. I think we will leverage all lines of P&L to continue to protect our business model and deliver a profitable growth. And what you see on the chart is a whole host of measures. As I talked to you already about tea, we have been quite judicious, notwithstanding the inflation. We are looking at full net revenue management to manage this. And in line with our principles, I think prices enduring an inflationary period will be calibrated, will be judicious. But I think the big difference is that, I think this time, we will have a very differentiated approach to really gain competitively and actually gain from the unorganized segment. Crude prices continue to be benign. And to that extent, we have actually passed on some of the benefits in our Home Care portfolio by lowering the prices. The aspect and how we really run the savings agenda is well-known to all of you. We have also moved down the path of trying to make more of our cost variable. You've also seen that we're making some very good progress from a nutrition perspective. I think the important call out for us is that, look, we are continuing to invest and invest well behind our brands to remain competitive. We are also focusing both on reach as well as SOVs, given the higher intensity with respect to advertising. On a sequential basis, our advertising spends are up INR 342 crores. I think it's also important to understand that we have also found -- we also had benefits of rate savings come into the quarter, which in a manner, if you were to compare on a Y-o-Y basis, actually means that we have spent much more from a GRP's and a reach point of view. If I look at now the segmental performance, I think the numbers are fairly, fairly clear. And from a segmental point of view, Foods & Refreshments here is not a comparable growth, but includes the acquisition. Our margins continue to be quite healthy across all the 3 divisions. And I think this really gives us the good balance sheet and the P&L power to continue to drive our business. Therefore, when you see, I think September quarter performance has been a good step-up in terms of sequential growth, and sequential margins have also been maintained. I think just a quick call out here. We have also had some prior period adjustments, which have impacted, had a favorable impact on our tax and the interest lines. In tax, approximately, we've got about INR 35 crores as a prior period, which also has a base of about INR 15 crores on -- INR 50 crores. And on the interest line, we have seen a benefit of about INR 17 crores. I think this starts to help you to understand some of the movements between PAT -- PBT, PAT and net profit. A quick snapshot view of the first half performance. While the reported growth are at 10%, the domestic consumer growth still is at about negative 2%. Our EBITDA margins are up 8% on a Y-o-Y basis. Taking into account the performance of the company, I'm pleased to inform you that the Board of Directors have actually recommended an interim dividend of INR 14 per share for the year ended March 31, 2021. Looking ahead, and I think Sanjiv spoke about it, while the outbreak of COVID-19 has disrupted businesses massively, we believe that the worst is possibly behind us from an economic standpoint. And therefore, we are cautiously optimistic about the prospects of the business looking ahead. Rural growth is looking ahead. Rural has been growing ahead of urban for various reasons, and I'm sure we will talk about it, and that we need for it to sustain. Urban is still looking a little uncertain for the various factors. In these circumstances, while it may be a little difficult to estimate market growth or recovery, I think it's fair to say that we will start to see good traction from here on. And hence, the reason for us to be really cautiously optimistic. Inflation in select categories such as tea is likely to continue. While we will play all levers which are available to us, this could mean that gross margins will remain under pressure in the short term. But as I spoke to you, I think this is the right thing for us to do, is actually to focus on competitive volume-led growth. And if it means that some of the margin expansion is not at the desired levels or the levels we would like to be, it's absolutely okay with us. We will invest to really drive growth. And I think there are enough levers for us to actually come back to our usual rhythm of competitive and profitable growth, the way we have done it for some time now. I think the organizational strength in this context remained unchanged, which is brand portfolio, which is talent and capabilities and our organizational speed and agility. With these streams and experience in our fold, we are placing our trust on driving competitive volume-led growth. Our focus for some time will be on absolute profits and cash delivery. We are quite confident that we'll come out -- we are and we will come out further stronger from this crisis, and we also remain confident of the medium to long-term prospects of the FMCG sector. Thank you for hearing us out, and we are very happy to take any questions at this stage. Over to Amit and the operator.

Thank you, Sanjiv. Thank you, Srinivas. With this, we will now move to the Q&A section. In addition to the audio, as always, our participants have an option to post questions through the web option on your screen. We will take those questions just before we end. Before we get started with this session, I would like to remind you that the call and Q&A session is only for institutional investors and analysts. And therefore, if there is anyone else who is neither an investor nor an analyst but would like to engage with us or ask us a question, please feel free to reach out to the Investor Relations team. With that, I would like to hand back the call to you, Aman, to manage our next session.

[Operator Instructions] First question is from the line of Abneesh Roy from Edelweiss.

Yes. Congrats, Sanjiv, on good performance and recovery. My first question is on the 2 brands, which are being taken national. So Domex and Boost. So what is the thought process currently on both brands being taken national? Is it largely because of the COVID opportunity? Or do you think that there are other parameters which have been met. And so now finally, this is the time to take it to the next level. If you could give more color to why you think this is the right time for both the brands.

Yes. Thank you, Abneesh. Let me talk about Domex. Yes, Domex is a brand which we have been growing the roots in southern part of the country for the last many years. And you would recall, we had also come out with powder Domex about 2 years back, which is doing reasonably well for Indian kind of squat toilets. So we were very clear that this is something which is a long-term play for us. And with COVID, one of the behavior, which is very clearly apparent is the fetish for cleanliness, disinfectant and hygiene everywhere. And we have extended the range of Domex, yes, it is hypochlorite based and it kills immediately the germs and viruses. And it could not have been a more opportune time than now that after having sown the seeds in South India to take it national. Boost, we were very clear that it's a great brand. And there are pockets where it has huge potential. Keeping that in perspective, even before we consummated the deal, we were absolutely clear that we are going to take it national. It has great heritage, great saliency, and it's now all about extending it. And [ Neesh ] and the team, at an opportune time, we will share with you the fabulous work that is happening on innovation in the HFD portfolio, which will really strengthen our presence and make the brand grow faster and taller and longer when it has come into our portfolio.

Sanjiv, on Boost, if you see, Indulekha saw 4x, 5x jump in sales once you took over in the next few years. So in Boost also, is that the thought process that this is a much lower-hanging fruit versus scaling up Horlicks because it's not pan-India presence?

It is like this. If you look at the markets and you map out the markets, there are markets which are white, there are markets which are brown. And there are markets where there is a very clear plan that Boost can play a much bigger game. And that is the reason why we have launched and taken it to -- across the country. Earlier, it was only in certain pockets in the country. So I would say that after acquiring the GSK business, we are now even more confident about the growth potential of this business and also about the cost synergies that we'll bring forth in this business. And the wonderful bit has been, Abneesh, that the integration, despite all the constraints, has been near flawless. And the people who have come over to our fold are extremely delighted to be part of the journey, which you would have seen from the UniVoice scores.

Right. Sanjiv, my second question is on Foods. In Q1, if you see, biscuit players did amazingly well, and you also grew double digits. Now in Foods portfolio, you have again grown double digit. And in fact, you have called out acceleration, while biscuit has seen a significant slowdown from a 21% volume growth to just a 9% volume growth. So wanted to understand consumer behavior here. Is it a more proactive step from you which has prevented a slower growth quarter-on-quarter?

See, Abneesh, our Foods & Refreshment portfolio has, excluding the HFD, the nutrition part of the business, which we acquired from GSK, has grown by 19%. And it's been a very impressive growth. And we have seen growth across the portfolio. Tea, we have been on a very good rhythm. Yes, you've seen it over the years, even after taking over leadership, we have kept strengthening our portfolio. Coffee has grown very handsomely. And the entire Foods range, whether it is Knorr soups, whether it is Kissan range, the entire portfolio has grown majestically. Part of it, of course, is linked to the fact that people are at home, they are not going out to restaurants and so the consumption has gone home. To an extent, it has also been offset by the fact that our out-of-home business, which included the vending business, has been impacted. But yes, on an overall basis, I think Foods has delivered exceptional growth.

And my last question is essentially on Skin Care. So essentials has seen a resilient performance and in fact, growing. What I could not understand was the winter selling wherein you have, in fact, did lower.

So let me explain on winter. Winter, what happens is, generally, the trade would start purchasing in the month of September. Yes. This year, the trade has been a bit cautious and which is for understandable reasons. And they say we will pick it up, not in September, but when the winter comes in. And I perfectly understand because of the sentiments in -- not only in our country but across the world, that they did not want to lock in the inventories ahead of time. But as soon as you see the whiff of winter coming in, I'm certain they will start purchasing it.

But Sanjiv, that was the question. There's a lead time before customer can get it, trade stocks it first. So won't it be a bit late when trade starts stocking when winter actually sets in because earlier years, we've seen that.

Winter runs for normally 2, 3 months. Yes? It starts in November and not even 3 months, really till the time of Holi, the winter products keep selling in. And so it may be at best a week time. Our direct distribution will cover it in a week's time. Our indirect, it may take 2 weeks' time. And I'm sure that as the winter -- as the temperature drops in the northern part of the country, this will pick up. So I'm not much very worried at this stage about the winter products. I believe that the offtake will happen. And the trade has been, for reasons which one can understand why they have been circumspect in not picking it up earlier.

I think the only element to add to this -- Abneesh, the only element to add is, I think the amount of speed and agility at the back end from a supply chain point of view and go-to-market, I think we've also made significant step-up and improvements there, which will actually help us even if, let's say, some of the service time would be a little less than what we had earlier. So there is enough which has been done at our back-end to cater to that.

And just to understand it fully, essentials in Skin Care, a bit difficult to understand for outsider. So is the winter -- most of the winter products is considered essential by consumer as per you? Or it's...

The way we articulated it about core of some of the portfolio. So for example, if you look at Glow & Lovely and some of the key packs there, they've all done well, yes? So more than about 2/3 of that portfolio has actually started to see some decent growth. It's really the skin care part, which is linked -- sorry, the winter part, which is where we have called out as saying there's bit of a phasing issue there.

The next question is from the line of Latika Chopra from JPMorgan.

I have 2 questions. The first one was, I wanted to check on 2 aspects, promotional intensity and consumer down trading. Are these trends evident over the recent months? And any specific categories you may want to call out where you would have come across these shifts?

The first is, there are 2 behaviors, Latika, which are very apparent. One is that in big cities, consumers are going in for larger packs, which also provides more value. But it also means less frequency of buying. And in smaller cities, there is more frequency of buying because they are more concerned with outlay. As far as down-trading is concerned, there is not one call that we could say, which would be applicable across the categories. Yes? For instance, most households have got repertoire of brands. Yes? If you are into a laundry category, then you would be having not just Surf Excel, but you would many times carry Rin and many times also carry Wheel, and you use it for different purpose. But if you use Surf Excel for cleaning your children's clothes or your husband's clothes when they workout, and if they don't go out, then to that extent, you may not have the same level of consumption of the Surf Excel brand. Now laundry, very clearly, which we have also indicated, has been impacted by the fact that with confined living, yes, it is not something which is dramatic, it is not like out-of-home, but to an extent, it has been impacted. And I believe that when people start coming out, they would get back to it. So there has been no dramatic shift as far as down-trading is concerned.

Sure. And just on your point on laundry. Clearly, Hair Care has come back to double-digit levels. You did talk about part of Skin Care portfolio also doing well. So as you exited the quarter with lockdowns easing and people stepping out more, did we see a sequential improvement even for laundry offtake?

See, it has remained consistent because the first -- the June quarter and September quarter may not all be comparable because June quarter was also having an impact of pipeline fill-in against the pipeline shedding, which happened during the March quarter. So I would say that it is not anything which is of a serious concern for us. Yes, we have very strong portfolio of brands, and they're all purpose-led brands. And we have a history of sustained high performance, and we'll get back to growth. We are seeing now very clearly, things like liquids and all, things like fabric sensation or conditioners, picking up speed. So I would believe even the mainstay of cleaning will also pick up.

Great. And just the last one was on Glow & Lovely placement. Is the placement now done nationally? Is there still more room to cover here from a distribution perspective? And I'm not sure, but any sense on initial response from consumers regarding the transition feedback?

I would not like to declare victory at this stage, yes, but we are pleased with the performance.

Sure. And from a distribution perspective, have we covered it nationally as you intended to?

Yes. Yes. Yes, as we speak now, it has been covered.

The next question is from the line of Percy Panthaki from IIFL.

My first question is on the 80% of your portfolio, which has done very well. And congratulations to you for that. It has grown at 10%. But if I break this up a little further, so this 80% includes home care and within that detergents, and detergents has seen a decline this quarter. And despite that, the 80% portfolio has seen a 10% growth, which means excluding that detergents portfolio, the rest of the businesses have actually grown at some maybe 16% to 17%. Now if that is true, what really drives this growth? And is this a sustainable growth? Because is it just that there is -- although your distributor inventories might not have changed, is it that the retailer inventory has changed. There's an upstocking at the retailer level or even at the consumer level, which is driving a 16%, 17% growth? Or have you gained a huge amount of market share, and therefore, the 16%, 17% growth is not due to any kind of pipeline in any link of the distribution change? If you can just help me understand this number, it would be helpful.

Sure. Percy, obviously, your math is very good. If we look at foods and refreshment, like I said, has grown at 19%, Household Care, yes, that it is home and hygiene, that's done brilliantly. Skin cleansing has done very well, all double digit, double digit, I'm talking about. Oral Care has done very well. Hair has done very well. All these are in double digits. And when it comes to trade loading, in fact, we have cut down on our DTA spends. Yes. So the question of loading the trade doesn't arise at all. And then there are 2 yardsticks that we look at from our perspective, we look at the health of our business. One is penetration, which is so key for us. And in 70% of the business, despite the economic slowdown that is happening, we've gained penetration, relative penetration. And the second aspect is, while the normal using of Nielsen shares is still not available for us. But we look at a surrogate measure, which is the volume shares coming out of the Kantar household panel. And in over 90% of the business, we are gaining handsome volume share. And Kantar as you know, is not great. It is home consumption.

So the only element I'll add, Percy, to what Sanjiv has covered is, again, tea as a category, so given the levels of inflation that they have been. And our ability to be judicious and our ability to manage it, given our balance sheet strength, also means that we are gaining handsomely versus unorganized. And therefore, that's also a clear translation of share gain, which also means growth for us. And that's the only additional call out to what Sanjiv had said.

Understood. Understood. And if I basically look at your 10% growth of the 80% portfolio, would you be able to give some color on how that 10% would be broken up between urban and rural?

Yes, I'll tell you what has happened today. Urban has been impacted because a lot of our business are out-of-home and discretionary, like the Lakmé business, like the Deo business and most of the out-of-home were all urban business. The other is, one should also understand that there have been shift of people from metropolitan cities to rural areas, with all the workers going back. There, at the end of the day, were also consumer of our goods and they are pretty large substantive in numbers. But -- so -- and the other is, of course, because people are not stepping out, channels like modern trade, et cetera, have been impacted, which is also very apparent. But suffice to say, and also one more fact that rural is also coming from a low base. If you recall, Percy, that last year around the same time, we used to be worried about the rural consumption because that's been slowdown. So they're coming from a low pace. But suffice to say that rural is growing in the 80% of the portfolio, much ahead of urban.

I see. Okay. So basically, rural, even in that 80%, if that 80% is 10%, rural is much higher than that 10% number?

Yes. Because it's confined living, urban, which has impacted consumption.

Right. Right. Understood. And finally, if I might ask on Fair and -- sorry, Glow & Lovely now, basically, whatever business we've seen -- sorry?

I said, get used to the new name my friend.

Yes. So in Glow & Lovely, whatever weakness we've seen, obviously, there is a COVID impact to that. But has the weakness been accentuated by the fact that it is undergoing a complete change in packaging, name, et cetera, et cetera? Or there's no incremental effect of that over and above the COVID impact. So what I'm trying to say is that if the name change did not happen and the new product sort of -- I mean, the entire relaunch did not happen, would you have seen similar sales performance of the brand or not?

See, the concept of Glow, the proposition of Glow got thoroughly tested during the last relaunch. So I'm absolutely confident that we won't have an issue. And then when you look at it, our relaunch, the new stock started going in, in September. So in the September quarter, we have not seen the full impact of primary placement also of Glow & Lovely, but it would be more seen during -- the entire thing would be felt during the October-December period. But then you look at discretionary, which was running at minus 45% in the June quarter has come down to minus 25%. So I am -- but like I was telling Latika, I would not like to declare victory, but I'm very confident that Glow & Lovely will be a big success.

The next question is from the line of Vivek Maheshwari from Jefferies.

A couple of questions again on this Fair & Lovely to Glow & Lovely migration. First is this A&P spend, which have moved up quite a bit in the context of still pressures in out-of-home and discretionary, so would there be some of these spends, which will be essentially because of the brand transition, something which will kind of reverse or will even out as we head into maybe third and the fourth quarter?

Srini, do you want to take this? Say hi, Vivek.

So -- yes, hi Vivek. So will there be some spends related to Glow & Lovely transition? Absolutely, yes, because it's one of the biggest changes and launches. So we have spent in September quarter to an extent. We'll also do it in December quarter. I think the important aspect to also call out is as the country is opening up, and the focus shifts from completely from a supplies point of view to really demand generation, which also, therefore, necessitates that you continue to invest behind your brands and make them competitive because if you really look at what had happened in June quarter. We had also pulled down spends quite a bit because there was unavailability of stock and the country was disrupted. So clearly, from that point of view, I think there is a job of demand creation, and we have invested across all our categories. And therefore, you would see a step up in spend, whether it's Home Care or in Beauty & Personal. The second aspect also is that, look, the same opportunity as we are seeing, many others are also looking at that. So overall, if you see from an advertising point of view and media, spends have gone up. Clearly in line with our principles, I think we are focusing on reach. We are focusing on getting the right SOVs. And therefore, we have spent. And if I look at December quarter, our objective would be to continue to invest further behind our brands. Yes, in due course, we will see some of the spends that we are doing on Glow & Lovely will start to taper down because there is a certain burst that you will do from a transformation and a transition point of view. But that's more likely to come towards the March quarter, where we'd have at least spent a few months in terms of building the awareness from a consumer's point of view, and then you'll start to see a bit of taper down specifically to Glow & Lovely. But overall, I think it is the right time to continue to invest, and we are comfortable to invest to really drive demand generation.

Got it. And the other aspect is, I don't know whether it makes as much sense, but let's say, Fair & Lovely was a huge brand. But let's say, the fact that Fair & Lovely transforms into Glow & Lovely. Does the work -- as you move from, let's say, Fairness to Glow, does that also changes the dynamics in some ways that, let's say, Fairness was targeting a particular subset within the skin portfolio, whereas in case of Glow there is a bigger canvas to play with. Is that something which is positive in our view?